Exam 19: A Macroeconomic Theory of the Open Economy: Part B

According to the open-economy macroeconomic model,if the United States moved from a government budget deficit to a government budget surplus,U.S.real interest rates would increase and the real exchange rate of the U.S.dollar would appreciate.

In the open-economy macroeconomic model,other things the same,an increase in the exchange rate raises the quantity of dollars supplied in the market for foreign-currency exchange.

The key determinant of net capital outflow is the real interest rate.

If policymakers impose import restrictions on clothing,the U.S.trade deficit will shrink.

In the open-economy macroeconomic model,net capital outflow links the markets for loanable funds and foreign-currency exchange.

An increase in a country's real interest rate reduces that country's net capital outflow.

The purchase of a capital asset adds to the demand for loanable funds only if that asset is a domestic one.

In an open economy,the supply of loanable funds comes from national saving.

Capital flight raises a country's interest rate.

Although trade policies do not affect a country's overall trade balance,they do affect specific firms and industries.

An increase in the government budget deficit shifts the demand for loanable funds to the right.

In the open-economy macroeconomic model,the real exchange rate does not affect net capital outflow.

In the open-economy macroeconomic model,if there is currently a surplus in the foreign exchange market,the quantity of desired net exports will increase as the market moves to equilibrium.

Other things the same,a higher real exchange rate raises net exports.

As the interest rate rises,it is possible that net capital outflow could move from a positive to a negative value.

In the open-economy macroeconomic model,a higher domestic interest rate reduces the quantity of loanable funds demanded